Deloitte Study Tells States to "Mind the Fiscal Gap" ; Analysis ties long-term fiscal sustainability to how well states handle budget challenges and deficit reductions

WASHINGTON, April 25, 2011 /PRNewswire/ -- A new Deloitteanalysis of the current fiscal standing of state governmentsexamines the potential impact on states' long-term fiscalsustainability based upon how governors and legislators address thisyear's budget challenges and deficit reductions. Deloitte'sanalysis, "2011 State Government Industry Outlook: Mind the Gap"makes it clear -- maintaining the status quo will not work.

According to the Center on Budget and Policy Priorities, thecumulative budget shortfall for states in fiscal year 2011 could top$119 billion even after earlier cuts. In order to manage this large-scale budget imbalance, Deloitte's analysis asks states to "mind thefiscal gap" between revenues and expenditures, and address practicesthat contribute to current challenges. Prior practices, such asfocusing more on short-term deficits than changing spending patternsare forcing legislators to ask difficult questions.

However, the good news in Deloitte's analysis is that states arenow, more than ever, in a position to develop a new, more responsiveand responsible operating model. And, by letting go of the statusquo, states can address their financial imbalances and reach fiscalsustainability.

"States' budgets face an unprecedented level of deficit that adhoc measures aimed at closing fiscal gaps, such as workforcereductions and increased taxes, alone cannot address," says RobertN. Campbell III, vice chairman and U.S. state government sectorleader, Deloitte LLP. "Despite this grim outlook, state governmentshave a unique opportunity to reshape the way they approach budgetsand planning to reach solid ground."

The 2011 State Government Industry Outlook offers executive andlegislative leaders the following recommendations to help achievefinancial stability:

Improve State Competitiveness - State legislators can reshape andgenerate economic development opportunities by promoting innovationand collaboration and encouraging education reform and public-private partnerships.

Implement Health Care Reform - Health care costs are a huge statechallenge -- with or without health care reform. States have alimited time to implement processes to comply with reformprovisions. By encouraging reform in impact areas, includinginsurance exchanges, transparency and health information technology,state leadership can maintain cost-effectiveness.

Capitalize on Technology Trends - Notably, by developing cloudcomputing models and incorporating data and analytics into stategovernment, states can better manage growing technology. Inaddition, protecting sensitive information shared over the Internetcontinues to be a priority even though it will mean more capitalinvestment.

To achieve a long-term budget solution, Deloitte suggests statesconsider and institute sweeping, systemic changes that will requirepersistence on the part of political leaders and citizens. Thesechanges will involve a fundamental alteration in how states conductbusiness and deliver service, and how they finance and administeragencies and programs. The Deloitte analysis further advises that byaddressing these needs and refusing to settle for the quick returnsolution, state's can be better positioned to move towards financialstability and long-term sustainability.

To download a copy of the study, please visit: www.deloitte.com/us/2011GovtOutlook.

For more information about Deloitte's U.S. State Governmentpractice, please visit: http://www.deloitte.com/us/stategovernment.

As used in this document, "Deloitte" means Deloitte LLP and itssubsidiaries. Please see www.deloitte.com/us/about for a detaileddescription of the legal structure of Deloitte LLP and itssubsidiaries. Certain services may not be available to attestclients under the rules and regulations of public accounting.

SOURCE Deloitte